Updated May 6, 2019

Best Online Brokerage

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What is the best online brokerage accounts for beginners? Read this guide to find investing platforms for mutual funds, IRAs, day trading and more.

Choosing an online broker is an important decision, though. Choosing the wrong one could cost you just as much as if you chose a full-service broker.

Read on to read our picks for the top online brokerage.

What Is an Online Broker?

The days of trading stocks over the phone are long behind us. Today, you can handle all of your trades electronically. Sitting at your computer or device, you can conduct trades daily, weekly, or even just a few times a year. Typically, you do this by using an online broker's platform.

Using an online broker, you enter your order, which then goes to the market. Once the order is executed (a buyer or seller is found), your broker receives the contract. The broker completes the purchase or sale (sends money or receives stock shares) and completes the transaction.

The entire process is handled online. However, some brokers offer in-person advice for higher commissions.

The Types of Online Brokers

Online brokers come in all shapes and sizes. Your experience and needs will determine which type is right for you.

Choose from one of the following online brokers:

  • Full-service broker: As the name suggests, a full-service broker offers a full range of services. You get more than a trading platform. You also get advice (if desired), research, tips for successful retirement, and even tax advice. The services usually come at a price. However, there are many options available. This allows you to keep your fees low, but your services plentiful.

  • Discount broker: Investors trying to save on fees may do better with a discount broker. These brokers charge less, but you will sacrifice services. Most notably, you won't receive advice. In other words, you should know what you are doing in order to succeed with a discount broker. If not, the money you save on trades could get washed away with the money you lose on your investments.

  • Robo-advisors: Taking the human element out of trading even further, robo advisors automate everything. You enter your income, goals, and risk threshold and the software does the rest. You may save even more on fees with these brokers. However, it's very unlikely that you'll speak to anyone about your investment strategies.

Why Use an Online Broker?

The most obvious reason to use an online broker is the cost. Using an in-person, full-service broker can easily chip away at your profits. Online brokers usually charge a flat fee per trade. You know your costs up front and can determine what you can afford.

Using a full-service broker can mean paying the flat fee charges typical of discount brokers, and a percentage of your trade. Some full-service brokers even charge a percentage per year of your total assets. It's safe to say this amount can quickly add up to more than the $4.95 or even $9.95 per-trade fees.

Money aside, if you like to be in control of your investments, an online broker is the right choice. Think of yourself as in the driver's seat with a dashboard in front of you, ready to execute your orders. You can view your account at any time, enabling you to make split-second decisions.

You can also take your time and do your research. Since you are doing the research on your available broker options anyway, consider picking your investments too. You'll get the satisfaction of handling your own investments.

The final reason is simply time. You can call in an order to your human broker. However, you are at his or her mercy regarding order execution. What if he misses the window of opportunity? With an online broker, you call the shots and trade in a matter of seconds. Many platforms allow you to set "hot keys" that allow you to execute trades with the press of a button or two. Compare that to the time it takes to call a broker, have a conversation, and then have it executed. There's no comparison.

What to Look for in an Online Broker

So you want to use an online broker - but the choices are many. Before you choose the first one you come across, consider the following factors:

  • Minimum required investment: What type of investor are you? How frequently will you make trades? How much money will you keep in your account? This will help determine which online broker suits you best. The broker that requires a $10,000 minimum balance isn't right for the novice investor. But the one that requires just $1,000 might work just fine.

  • Fees you can afford: The broker with the lowest fees might not suit your needs. But the one with the highest fees may not be necessary. Focus on what you can afford as well as what services you require. If you are an infrequent trader, watch the inactivity fees brokers charge. If you'll make a few large trades, watch out for brokers that charge a percentage of your trade.

  • User-friendly interface: You want a platform with plenty of sophistication, but one that you understand. If you won't use all of the bells and whistles, why pay for them? Determine your needs and expertise. Then choose your platform accordingly. Many brokers we discuss below have multiple platforms available, helping all types of investors.

  • Type of advice offered: Consider how much involvement you need from an investment broker. In other words, how much human interaction do you require? Do you want to be in the driver's seat 100%, doing your own research and choosing your own trades? Or would you prefer someone guiding you along as you change your investment strategies? This will determine the type of online broker you choose. The more interaction you need, the more you need a full-service broker.

  • Quality of customer service: Again, determining how much support you need will help you choose the right broker. If you know you'll need some hand holding, look for brokers that offer 24/7 customer support. Pay close attention, though, sometimes it's strictly email or online support, rather than phone support.

Best Online Broker

The best online broker is the one that fits within your budget, yet provides the services you require. Read on to see how different brokers today stack up against the competition.

Best Overall Online Broker

TD Ameritrade offers benefits for both beginning and advanced traders. All traders have access to their premium platform, ThinkorSwim. They also receive numerous research options, instructional videos, and charts. The ThinkorSwim platform allows you to test your strategies on past stock history. Beginners and experts benefit from this user-friendly platform.

Infrequent traders who want to carry a low balance can do so with no penalties with TD Ameritrade. They have no minimum deposit requirement.

They also have great customer service offered around-the-clock, 7 days a week. You can email, chat online, or call them to obtain answers to your questions.

TD Ameritrade makes DIY research a cinch with their breadth of available research. You'll have access to charts, analyses, and reports to help you make decisions on your investments. If TD Ameritrade's research isn't enough, they also offer easy access to third-party research.

Investors with TD Ameritrade can invest in stocks, bonds, forex, and options as well as handle their retirement accounts. This makes TD Ameritrade a well-rounded pick for any investor.

Best Online Broker for Beginners

E*Trade tops the charts with customer support and a user-friendly interface. Its basic platform suits new traders quite well. It's not overwhelming, yet provides enough information to help you make informed decisions on your trades. Beginners feeling a little daring can even dabble in their more advanced platform, the OptionsHouse platform. While considered "advanced," its user-friendliness and E*Trade's customer support make it easy to use.

E*Trade offers access to a wide variety of investments, including stocks, bonds, ETFs, forex, futures, and options. E*Trade also offers retirement accounts, savings plans, and even small business tools.

One downside of E*Trade, however, is its minimum required balance of $500. While not a lot, it's still a requirement you must think about before you can trade.

Best Online Broker for Penny Stocks

Penny stock traders are at a unique disadvantage. Many brokerages add high surcharges to their commission for stocks traded below a certain dollar amount. Be careful, because some set that threshold as high as $5. Charles Schwab does not have any surcharges, however, and offers many more benefits for penny stock traders.

A few things we love about Charles Schwab are their in-depth research opportunities, user-friendly platform, and flat-rate fees even for penny stocks.

Keep in mind that Charles Schwab does require a $1,000 account minimum. They make exceptions for traders who automatically transfer $100 or more each month, though.

Charles Schwab offers 24/7 customer support. They also have two platforms, both of which are easy to use for beginners and advanced traders alike. If you do wish to have in-person contact with a broker, you have the option to use Schwab's branches throughout the US.

Best Online Broker for Day Traders

Day traders are a unique bunch. They don't care as much about per trade commissions as they do speed and streamlined research. Day traders don't need historical charts or a lot of analysis. Instead, they focus on split-second decisions and fast turnaround times. TradeStation offers the features day traders need to execute fast trades and customized platforms.

TradeStation offers two platforms - a web-based and PC-based platform. Web-based platforms are good for investors on-the-go, while the PC platform offers more sophistication when you are at your computer.

TradeStation thrives on multi-screen operations. They also have their own programming abilities through their EasyLanguage program. Their platform allows for ease of use because traders can customize their screens, even their colors, enabling them to see what they need immediately. Day trading relies on quick decisions that can be executed quickly and TradeStation delivers just that.

Best Online Broker for Options

Ally Invest is one of the more basic platforms, which is perfect for options investors. They offer low-cost trades with simplified options, making these trades less complicated.

One reason we love Ally Invest for options is their access to a community forum. Trading options is risky business, but talking to other investors can really help you get a thorough understanding of the process. You can ask questions, read other trading strategies, or even become a "trading expert" in the community yourself.

While Ally's trading platform is basic, it's filled with plenty of information to help you make informed decisions. You can customize the information you see for each security, helping you make the best decisions for you. If you are a research guru, you can have it all up on your screen. If you are a more simplified investor, you can pick and choose what you see so as not to overcomplicate things.

(Read Our Review of Ally Invest)

Other Brokers to Consider

Best Online Broker for Mutual Funds - Fidelity:
Fidelity is one of the oldest in the mutual fund business. With more than 70 years behind them and thousands of mutual funds to choose from, they are a great option. Fidelity offers state-of-the art research, impeccable analyses, and diversified portfolios to help you succeed in mutual fund investing.

Best Online Broker for IRAs - Merrill Edge:
Merrill Edge offers the best of both worlds - no account minimums and around-the-clock customer service. Even better, IRA investors can get in-person advice by visiting one of the 2,000 branches in Bank of America locations throughout the country. Merrill Edge offers traditional, Roth, and rollover IRAs.

Best Robo-Advisor - Betterment:
For a hands-off approach to investment, Betterment takes first place. With no minimum balance and low management fees, you can have your money automatically invested for you. Don't think it's completely hands-off, though. Investors who want advice have access to their financial advisors via their in-app messaging system.

If you have a complex financial situation or you received a large inheritance, you should consider seeking professional advice from a financial advisor. This is great for someone who needs a human advisor to help them with their financial matters and may not be as technologically savvy. A good advisor should explain the risks involved with investing and not try to overpromise their performance results.
Sandy Yong, author and speaker, The Money Master

Bottom Line

Trading stocks is risky business. You need an online broker that offers top-of-the-line research, great customer service, and affordable fees. Make sure you read the fine print and see how it affects your trading strategies before choosing your online broker.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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